Classification of Liabilities – International Accounting Standards Board

Date recorded:

At its meeting on July 22-25, 2019, the Board continued its discussion of comments on the Exposure Draft, which proposes amendments to paragraphs 69–76 of IAS 1. Paragraph 69(d) of IAS 1 states that terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification as current or non-current.

The Board tentatively decided to amend IAS 1 to clarify that this statement applies only to a counterparty conversion option recognized separately from the liability as an equity component of a compound financial instrument. Any other term of a liability that could result in its settlement by the transfer of the entity’s own equity instruments does affect the classification of the liability as current or non-current. The Board also tentatively decided to:

  1. require an entity to apply the amendments retrospectively in accordance with IAS 8;
  2. provide no exemption for an entity adopting IFRS Standards for the first time; and
  3. permit an entity to apply the amendments before their effective date (early application), but to require an entity that applies the amendments early to disclose that fact.

At a future meeting, the Board will review the due process steps carried out on this project; decide whether to give staff permission to begin the balloting process; and select an effective date for the amendments.

Review the IASB Update and podcast on the Board's Web site.

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